The Company's NAV returned +0.8% in May, outperforming the MSCI Frontier + Emerging ex Selected Countries Index ('Benchmark Index'), which returned +0.4%. For reference, the MSCI Emerging Markets Index returned +9.7% while the MSCI Frontier Markets Index returned +0.6% over the same period. All performance figures are on a US Dollar basis with net income reinvested. Within our universe, Peru (+11.9%) and Greece (+10.0%) were among the standout performers. Peru is mid Presidential election with right wing candidate Keiko Fujimori expected to win (just), while Greece continued to benefit from its expected reclassification to developed market status in May 2027. On the other side, Gulf markets lagged as softer oil prices and a rotation of investor flows toward technology-oriented markets elsewhere in EM weighed on sentiment. Stock selection across a variety of countries and sectors did well in May. Argentina's state-controlled oil and gas company YPF (+17.3%) was the largest contributor to returns. The stock rallied after a Q1 earnings beat, driven by strong shale production growth from the Vaca Muerta fields, and continued progress on the Vaca Muerta Sur oil export pipeline - a key piece of infrastructure needed to unlock Argentina's shale export potential. Another strong performer was UzNIF (+14.2%), an Uzbek SOE privatisation vehicle, which rose following a successful IPO that highlighted growing confidence in the country's economic reform agenda. Thai industrial real estate developer Amata Corporation (+23.2%) also contributed positively after reporting strong first-quarter results. Net profit increased 67% year-on-year, supported by higher industrial land sales and continued demand from technology and data-centre customers. On the flipside, Philippines based online gaming company DigiPlus (-22.8%) was the largest detractor as softer consumer sentiment weighed on gaming activity and transaction volumes. However, management are confident they will see month-on-month improvement through 2026, and we retain conviction at current levels. Kazakhstan-based Kazatomprom (-17.7%) also detracted after a sell-side downgrade. Mobile World Investment Corp (-9.5%), a Vietnamese retailer, was another detractor despite reporting strong first-quarter results. We made few changes over the month. We exited Turkish bank Akbank on concerns that elevated oil prices could pressure Turkey's targeted disinflation process and hurt the balance of payments. We also trimmed our exposure to Egypt's Commercial International bank as higher oil prices are similarly a significant negative input to both inflation and trade balance in Egypt. Elsewhere, we participated in the IPO of UzNIF, which is a Templeton-managed vehicle listing Uzbek state-owned enterprises. We see upside from regulatory reform and re-rating of several undervalued assets within the portfolio. Looking ahead, we remain constructive on the outlook for smaller emerging and frontier markets. Valuations across our investment universe remain attractive, both in absolute and relative terms. Many of these markets are still under-researched, and we believe this creates fertile ground for finding high-conviction, alpha-generating opportunities.
